The successes of Google, Apple, Amazon and other innovative, yet patient, global leaders underscore the advantages of not always being first to market. When it comes to adoption of cloud technologies, corporate finance groups also have a valuable opportunity to join the ranks of intelligent second movers. And CFOs can take advantage of lessons learned, practices developed and confidence gained from the recent cloud migrations of their partner business functions and teams.
That said, CFOs need to know that the clock is ticking.
Finance groups that continue to procrastinate crossing the Rubicon into the cloud will miss out on the value that other finance teams generate for their organizations through advanced cloud-based tools and technologies, including those that support next-generation forecasting capabilities. Remaining in a legacy, on-premise systems environment can also hamstring CFOs’ ability to attract the crème de la crème of the data scientists and finance technologists they need to meet the increasing data demands of their internal customers. Top technology talent gravitates to organizations where they can continually expand their knowledge and expertise in cutting-edge cloud-based tools and technologies. This is especially significant amid an expected long-term finance and accounting talent crunch.
Of note, according to the results of our recent global survey of CFOs and finance leaders, cloud-based applications that support finance are considered to be among the most important priorities to address over the next 12 months.
To date, finance’s cloud-migration patience has paid off, even if it wasn’t entirely by design. The finance group’s core supporting technologies, enterprise resource planning (ERP) systems, have lengthy renewal cycles that befit their hefty price tags and substantial value. As their multiyear licensing and/or upgrade renewal dates for on-premise ERP systems near, CFOs and finance leaders should work through a range of considerations related to the costs and benefits of moving to the cloud.
The good news is that most finance groups’ cloud migrations are better positioned to thrive today than they were a few years ago thanks to their early-adopting colleagues. Many organizations initiated their cloud migration by moving customer relationship management and marketing applications as well as data warehousing and data analytics solutions to the cloud. These shifts have generated a rich trove of insights and lessons while getting IT functions progressively more comfortable and confident in their ability to maintain and secure cloud applications.
After moving nonfinance workloads to cloud environments several years ago, organizations steadily developed and refined processes and capabilities related to securing, backing up, restoring and auditing cloud-based systems and applications. These organizations have conducted numerous auditing cycles since those early cloud migrations—this work has helped bolster the governance surrounding cloud systems. Over a similar period, cloud service providers have invested heavily in ongoing maintenance and security improvements, to the point that their cloud environments are widely considered more secure and more available than the average on-premise data center.
Given these learnings and advancements, finance leaders should begin considering the shift of their ERP systems and other finance applications to the cloud well in advance of renewal cycle due dates. Working through the following steps will help:
- Assess the benefits: The finance team should examine the advantages of moving their technology to a cloud environment. These benefits include immediate access to new functionality, quicker access to future functionality improvements, and cost savings, in addition to cloud-migration incentives that ERP providers may offer.
- Discuss the move internally and with key partners: The timing of the cloud shift should, of course, be discussed with other business leaders and within the finance group. Following these discussions, finance leaders should reach out to the stakeholders within the IT function, the information security team and the compliance function to ensure they are on board with the plan, as well as to identify and address any domain-specific concerns each group shares.
- Scrutinize the cost savings: While cost savings are almost always promoted as a rationale for migrating to the cloud, those general assumptions and estimates should be poked and prodded to determine the extent to which they apply to the unique characteristics of the finance organization and the larger enterprise it serves. For example, if a pay-for-consumption model is positioned as a source of cost savings, the finance group should look closely at current usage levels along with estimates of future consumption. Operational expenses should also be evaluated carefully if a software-as-a-service model will eliminate the need to internally manage updates, maintenance windows, outages and related administrative activities.
- Consider the opportunity costs of inaction: If a cloud-based ERP model reduces administrative and maintenance costs, that means the current on-premise model is a higher expense for the organization. Plus, legacy systems may not receive the same functionality improvements—either in quality or frequency—that their cloud-based versions receive, and when they do, those updates often take longer and require more resources to add to the on-premise version. Legacy systems may be laden with technical debt, which is the cost and magnitude of additional rework created by choosing easy-to-implement technology solutions over the short term instead of the best overall solution for the long term. Technical debt accumulates over many years, even decades, and can be a powerful constraint to any organization’s innovation and efficiency efforts. Transitioning to the cloud offers proven solutions for reducing that debt.
- Leverage options to enhance processes: Finance leaders should treat the “lift” to the cloud as an important process-improvement opportunity. Can any processes that the ERP system supports be streamlined? Are there heavily customized and/or nonstandard workloads in the existing installation that can be simplified prior to the migration? It’s more cost-effective to re-engineer processes in need of improvement prior to the migration.
By letting their eager first-to-market colleagues make the initial leap to cloud-based technologies, CFOs invested in a patient and observant approach. Optimizing the returns on that decision investment means being a savvy second mover to the cloud before the opportunity cost of delaying becomes so high that it inhibits the efforts of the overall organization to obtain better, timely information for decision making and improve business performance.
This article originally appeared on Forbes CFO Network.